French car maker PSA Peugeot Citroen is in talks with Tata Motors over a potential alliance, Germany's Manager Magazin reported on Wednesday, citing unnamed company sources.

Peugeot chief executive Philippe Varin is looking for an alternative should cooperation with General Motors and its European Opel division collapse, the magazine said.

A spokesman for the Indian automaker however said that the report is "absolutely incorrect".

GM and Peugeot have halted talks on a deeper tie-up amid misgivings about the French carmaker's worsening finances and government-backed bailout, Reuters reported on Tuesday citing people familiar with the matter.